In this issue
In the 1990s, Bob Finfrock’s family business was feeling the effects of an increasingly price-driven market. As a result, Bob faced a daunting business decision with significant implications for his family: Should he start to compete against his customers in order to build a more rapidly growing business?
One might expect the skills and business acumen that enable a family to operate a successful private company to naturally extend to the management of personal wealth. Experience suggests that this often proves to be untrue, for a number of reasons:
• Although a family may cede management control of its private business to one or more family members, a larger contingent of adult family members with competing priorities may desire a voice in wealth decisions.
For 25 years I’ve run a practice that specializes in estate management, so it wasn’t unusual to have an attorney contact me a few years ago about the possibility of establishing a family limited partnership (FLP) for one of his clients. The client was worth about $7 million, but he had been so focused on building the business that he hadn’t looked into how he might structure his organization legally.
Our discussion took place over several weeks. We seemed to be moving forward. But then one day I got an unusual call from the attorney.
Does the thought of a prenuptial agreement make you anxious and uncomfortable? Do you fear that bringing up the topic with your spouse-to-be might put the brakes on your relationship?
Increasingly, business-owning families who want to keep the business in the family are transferring shares in trust rather than outright. A trust can offer substantial long-term tax advantages, protection for family members against potential creditors and, when family members aren’t prepared to take over, the possibility of professional fiduciary oversight of a critical family asset.